Mini Exam Review

Chapter 1
Objective 1: Activities and users of accounting
1. Define the three activities of accounting:
a. Identify:

b. Record:

c. Communicate:

2. Give examples of the uses of accounting:

a. Internal:

b. External:

Objective 2: Ethics, Principles, and Assumptions

1. Identify the term to the definitions: Ethics, Generally Accepted Accounting

Principles (GAAP), International Accounting Standards Board (IASB),
International Financial Reporting Standards (IFRS), Sarbanes-Oxley Act (SOX),
Security Exchange Commission (SEC):
TERMS DEFINITION
Law passed by Congress intended to
ETHICS
reduce unethical corporation behavior
An accounting standard-setting body
IASB that issues standards adopted by many
countries outside of the United States
Standards set by the International
IFRS
Accounting Standards Board
The standards of conduct by which
one’s actions are judged as right or
wrong, honest or dishonest, fair or not
fair
Common standards that indicate how to
report economic events
A governmental agency that oversees
US financial markets and accounting
standard setting bodies

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 2. Match the following to the correct definition: Economic Entity Assumption, Fair
Value Principle, Historical Cost Principle, Monetary Unit Assumption
TERMS DEFINITION
States that assets and liabilities should
be reported at the price received to sell
an asset or settle a liability
States that companies include in their
accounting records only transaction
data that can be expressed in terms of
money
Requires that the activities of the entity
be kept separate and distinct from the
activities of the owner
States that companies should record
assets at their cost
3. Types of Business Organizations:
4. Types of Business Organizations:
a. Proprietorship:

b. Partnership:

c. Corporation:

Objective 3: The accounting Equation

= +

1. Define Asset:
a. Examples:

2. Define Liability:
a. Examples:

3. Define Stockholder’s Equity:

Define the following and indicate if it increases or decreases Stockholder’s Equity

a. Common Stock:

b. Revenue:

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 c. Expenses:

d. Dividends:

Objective 4: PRACTICE - Analyze the accounting equation

Example: Analyze the following transactions for Hawk Corp. These relate to the first
month of business beginning January 1, 2020.
1. Invested $10,000 in exchange for Common Stock
2. Purchased Equipment of $700 for Cash
3. Purchased Supplies of $400 on account
4. Performed services for customer and received $3,000 cash
5. Paid salaries of $1,500 to workers
6. Paid $200 of amount owed in transaction #3
7. Performed services for customer received $500 and sent a bill for $2,000.
8. Paid Rent Expense of $1,000
9. Received $600 from transaction #7
10. Paid dividends of $300

ASSETS LIABILIT STOCKHOLDERS EQUITY

Y
Cash AR Supplies Equipment AP Revenue CS Expenses Dividends
1 10,000 10,000
2 (700) 700
3 400 400
4 3,000 3,000
5 (1,500) 1,500
6 (200) (200)
7 500 2,000 2,500
8 (1,000) 1,000
9 600 (600)
10 (300) 300
SUM 10,400 1,400 400 700 200 5,500 10,000 ( 2,500) (300 )
12,900 12,900

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Objective 5: Financial Statements
Define:

1. Income Statement:

2. Retained Earnings Statement:

3. Balance Sheet:

4. Statement of Cash Flows:

Example: Build the financial statements for Hawk Corp as of January 31, 2020.
Income Statement

Retained Earnings Statement

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Balance Sheet

Chapter 2
Objective 1: Debits and Credits
1. A debit is on the ___right___ side of a T account 2. A
credit is on the ______left_______side of a T account
3. Double entry system provides that _____asset________ must equal ____labilities
+ equity________.
4. A Normal Balance is the side where _______accounts________ are recorded.

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PRACTICE:
INCREASES WITH DECREASES WITH
DEFINE
(Debit or Credit) (Debit or Credit)
ASSET debit credit
LIABILITY credit debit
COMMON STOCK credit debit
RETAINED credit debit
EARNINGS
DIVIDENDS debit credit
REVENUE credit d ebit
EXPENSES debit credit

PRACTICE: Indicate the Normal Balance of each account.

Cash debit Retained Earnings credit
Account Payable credit Prepaid Insurance debit
Land debit Unearned Revenue credit
Supplies Expense debit Salaries Expense debit
Interest Payable credit Notes Payable credit
Account Receivable debit Supplies debit
Dividends credit Common Stock credit
Service Revenue credit Rent Expense debit

Objective 2: PRACTICE - Journal Entries

Example: Analyze the following transactions for Hawk Corp. These relate to the first
month of business beginning January 1, 2020.
11. Invested $10,000 in exchange for Common Stock
cash 10,000
Common stock 10,000
12. Purchased Equipment of $700 for Cash
equipment 700
cash 700
13. Purchased Supplies of $400 on account
supplies 400
Accounts payable 400
14. Performed services for customer and received $3,000 cash

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 cash 3,000
Service revenue 3,000
15. Paid salaries of $1,500 to workers
Salaries expense 1,500
cash 1,500
16. Paid $200 of amount owed in transaction #3
Accounts payable 200
cash 200
17. Performed services for customer received $500 and sent a bill for $2,000.
Cash 500
Accounts receivable 2,000
Service revenue 2,500
18. Paid Rent Expense of $1,000
Rent expense 1,000
cash 1,000
19. Received $600 from transaction #7
cash 600
Accounts receivable 600
20. Paid dividends of $300
Dividends 300
cash 300

Objective 3: PRACTICE- Posting

Cash AR Supplies Equipment AP
10,000 700 200 600 400 700 400
3,000 1,500 2,000
500 200
600 1,000
300

CS Revenue Expenses Dividends

10,000 3,000 1,500 300
2,500 1,000

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Objective 4: PRACTICE- Trial Balance

Debit Credit
Cash 10,400
Accounts receivable 1,600
Supplies 400
Equipment 700
Account payable 400
Common stock 10,000
Revenue 5,500
Expenses 2,500
Dividends 300
TOTAL 15,900 15,900

Sample Exam Problems:

1. All of the financial statements are for a period of time except the
a. income statement.
b. retained earnings statement.
c. balance sheet.
d. statement of cash flows.

2. Kennedy Company issued stock to Ed Kennedy in exchange for his investment of

$75,000 cash in the business. The company recorded revenues of $555,000,
expenses of $420,000, and had paid dividends of $30,000. What was Kennedy's
net income for the year?
a. $105,000.
b. $135,000.
c. $165,000.
d. $180,000.

3. Internal users of accounting information include all of the following except

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 a. company officers.
b. investors.
c. marketing managers.
d. production supervisors.

4. Delta72 Company received a cash advance of $700 from a customer. As a result

of this event,
a. assets increased by $700.
b. stockholders’ equity increased by $700.
c. liabilities decreased by $700.
d. assets and stockholders’ equity increased by $700.

5. On January 14, Edamame Industries purchased supplies with a cost of $700 on

account. The entry to record the purchase will include
a. a debit to Supplies and a credit to Accounts Payable.
b. a debit to Supplies Expense and a credit to Accounts Receivable.
c. a debit to Supplies and a credit to Cash.
d. a debit to Accounts Receivable and a credit to Supplies.

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 6. Presented below is information related to Pickett Real Estate Agency.
Oct. 1 Jeff Pickett begins business as a real estate agent with a cash
investment of $30,000 in exchange for 2 Hires an
administrative assistant.
3 Purchases office equipment for $3,500, by paying $500
cash with the balance on account.
Journalize the transactions. (You may omit explanations.)

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